The Nifty ended last week at 24,363, down 276 points or 1.12 percent, with most of the drop coming on Friday. This marked the sixth straight weekly loss, a stretch of weakness not seen since the early days of the Covid crisis in March 2020. While the total decline from the recent swing high is under five percent, the steady downward movement has dented investor confidence. The pressure has been driven by continuous selling from foreign institutional investors, which has also contributed to the rupee’s weakness for five consecutive weeks.
Technically, the Nifty has slipped below its 100-day moving average after already falling under the 20-day and 50-day averages earlier. For the past twelve sessions, the index has not managed a single close above its five-day moving average, signalling that short-term momentum remains weak. However, traders and analysts are closely watching two key support levels. The first lies near 24,170, which aligns with the 38.2 percent Fibonacci retracement level of the strong April to June rally. If this does not hold, the next potential support is near 24,060, marked by a long-term trendline that has historically acted as a floor for the market.
Beyond technical factors, the broader market mood is influenced by geopolitical and trade tensions. The recent trade war rhetoric, particularly involving the United States and India, has made headlines. While former President Trump has suggested tariffs as high as 50 percent on Indian goods, analysts note that even tariffs in the 10 to 15 percent range make business significantly harder. Many believe these high numbers are more symbolic than practical, aimed at raising political pressure rather than enforcing sustainable trade policy.
India has responded firmly, making it clear that its agricultural and dairy sectors will remain protected from foreign pressure. This strong position has encouraged other nations to push back against tariff threats, with even China voicing support for India’s stance on sovereignty. This resilience reflects India’s unique strength as a domestic consumption–driven economy, with more than 64 percent of its GDP coming from internal demand. Such a structure provides insulation from global trade disruptions and can help the country weather external shocks.
Foreign investor positioning is another factor worth noting. As of the end of last week, 91 percent of foreign institutional investor positions in index futures were on the short side, up from 85 percent at the start of the August series. Historical patterns show that whenever short positions have been this high, markets have often staged a rebound. Since March 2020, there have been four similar instances, each followed by an average seven percent gain in the Nifty during that same series. If sentiment turns, the need for these investors to cover their shorts could spark a sharp upward move.
While risks remain, the combination of oversold technical indicators, potential support levels, and an extremely bearish stance from foreign investors suggests that the market may be approaching a turning point. Any positive trigger whether from easing global tensions, encouraging economic data, or a shift in investor mood could quickly reverse the recent slide.
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